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9.4 Double Entry Book Keeping—CBSE XII

Solved Questions

Illustration 1.
X Ltd. has issued ` 1,00,000, 9% Debentures at a discount of 6%. These debentures are to be
redeemed at par equally spread over 5 annual instalments. It has a balance of ` 50,000 in
Securities Premium Reserve. Show the Discount on Issue of Debentures Account for 5 years.
Solution: Total amount of Discount on Issue of Debentures = ` 1,00,000 × 6/100 = ` 6,000. It will
be written off in the year of issue from Securities Premium Reserve.
Dr. DISCOUNT ON ISSUE OF DEBENTURES ACCOUNT Cr.
Date Particulars ` Date Particulars `
1st Year To 9% Debentures A/c 6,000 1st Year End By Securities Premium Reserve A/c 6,000

6,000 6,000

Illustration 2.
R & R Ltd. issued 15,000; 10% Debentures of ` 100 each at 6% discount on 1st April, 2019,
redeemable at par after 5 years. Issue was fully subscribed. According to the terms of issue,
interest is payable on quarterly basis. Interest for the quarter ending 31st March, 2020 was paid
on 31st March, 2020. Tax was deducted @ 10% and deposited in the Government Account.
Pass Journal entries for issue of debentures and interest.
Solution: JOURNAL OF R & R LTD.
Date Particulars L.F. Dr. (`) Cr. (`)
2019
Apr. 1 Bank A/c ...Dr. 14,10,000
To Debentures Application and Allotment A/c 14,10,000
(Application money received on 15,000; 10% Debentures @ ` 94)
Debentures Application and Allotment A/c ...Dr. 14,10,000
Discount on Issue of Debentures A/c ...Dr. 90,000
To 10% Debentures A/c 15,00,000
(Debentures allotted to applicants)
2019
Jun. 30 Debentures’ Interest A/c ...Dr. 37,500
To Debentureholders’ A/c 33,750
To TDS Payable A/c 3,750
(Interest on 10% Debentures for the quarter ended 30th June, 2019
payable @ 10% on ` 15,00,000 and tax deducted @ 10%)
Debentureholders’ A/c ...Dr. 33,750
To Bank A/c 33,750
(Interest payable for quarter ended 30th June, 2019)
TDS Payable A/c ...Dr. 3,750
To Bank A/c 3,750
(TDS deposited in the Government Account)
Sept. 30 Debentures’ Interest A/c ...Dr. 37,500
To Debentureholders’ A/c 33,750
To TDS Payable A/c 3,750
(Interest due for the quarter ended 30th September, 2019 and tax
deducted at source @ 10%)